Home » Opinion » Foreign Views
3rd generation often kills off family business
By Tseng Tan |
June 19, 2012, Tuesday
|
Print Edition
Print Edition
SHANGHAI Daily reported on June 8: "Samsung Electronics Co, Asia's technology powerhouse battling Apple for smartphone supremacy, is shifting its CEO to a new role as the family-run parent firm prepares to transfer ownership control to a third generation."
This report brings to mind the Chinese saying, distilled over the centuries: Fu bu guo san dai or wealth (power) will not last beyond the third generation in family-controlled business. In some cases, as shown in family-owned businesses from Japan to Singapore, many such businesses do not last beyond the second generation. In general, the process of degeneration goes like this:
The first generation, that is, the entrepreneur, founded the business and built the wealth and the second generation uses this foundation to maintain and in many cases, expand the business. It is the third generation that takes the inherited wealth for granted and uses it to serve their personal interests. Then, that family business, with many siblings fighting for power and self-interest, causes the business to disintegrate or become vulnerable to takeover by business rivals.
In the West, there are similar proverbs: "Three generations from shirtsleeves to shirtsleeves." In old England, the foundation of modern industrialization, the Lancastrians have a similar refrain: "Clogs to clogs in three generations."
What brings this curse to family-run businesses? Most of the time, it is promoting family members who worked less hard than unrelated outside-recruited employees. As writer Alain de Botton comments, positions were distributed according to bloodlines and family connections rather than talent. Family feuds later cause the rival siblings to focus attention and energy on maintaining political control instead of the business.
In a well-publicised case: Jamabhoy vs Jamabhoy, the court battle involving one of Singapore's richest families lasted 34 days. The company was started in 1916 by Rajabali Jumabhoy. The family feud featured father against son, brother against brother and uncle against nephew (The Straits Times, March 24, 1997).
Today, Scotts Holdings is no longer under family control. Another headline in 1994, about Yeo Hiap Seng, a regional force in food and beverages, was somewhat similar to the Jamabhoy case - "Model family-controlled group torn asunder by kin rivalry." There are numerous other examples of such family infighting that caused family-owned businesses to fall into the hands of others or just disappear from the business environment.
Family businesses which under-performed and which go under are those which failed to bring outsiders into top management positions.
Outsiders can be more objective when it comes to decision-making and dealing with non-performing family members in ways relatives cannot. There is, therefore, a need to ensure that succession planning be considered an impersonal business process - to ensure that the most capable be allowed to manage the business with outsiders included as choices.
As Ralph Waldo Emerson wrote, "Every man placed where he belongs, with so much power confided to him as he would carry and use." He was following an earlier tenet from Napoleon, "Whenever I found talent, I rewarded it."
The author is a HR consultant in Singapore.
This report brings to mind the Chinese saying, distilled over the centuries: Fu bu guo san dai or wealth (power) will not last beyond the third generation in family-controlled business. In some cases, as shown in family-owned businesses from Japan to Singapore, many such businesses do not last beyond the second generation. In general, the process of degeneration goes like this:
The first generation, that is, the entrepreneur, founded the business and built the wealth and the second generation uses this foundation to maintain and in many cases, expand the business. It is the third generation that takes the inherited wealth for granted and uses it to serve their personal interests. Then, that family business, with many siblings fighting for power and self-interest, causes the business to disintegrate or become vulnerable to takeover by business rivals.
In the West, there are similar proverbs: "Three generations from shirtsleeves to shirtsleeves." In old England, the foundation of modern industrialization, the Lancastrians have a similar refrain: "Clogs to clogs in three generations."
What brings this curse to family-run businesses? Most of the time, it is promoting family members who worked less hard than unrelated outside-recruited employees. As writer Alain de Botton comments, positions were distributed according to bloodlines and family connections rather than talent. Family feuds later cause the rival siblings to focus attention and energy on maintaining political control instead of the business.
In a well-publicised case: Jamabhoy vs Jamabhoy, the court battle involving one of Singapore's richest families lasted 34 days. The company was started in 1916 by Rajabali Jumabhoy. The family feud featured father against son, brother against brother and uncle against nephew (The Straits Times, March 24, 1997).
Today, Scotts Holdings is no longer under family control. Another headline in 1994, about Yeo Hiap Seng, a regional force in food and beverages, was somewhat similar to the Jamabhoy case - "Model family-controlled group torn asunder by kin rivalry." There are numerous other examples of such family infighting that caused family-owned businesses to fall into the hands of others or just disappear from the business environment.
Family businesses which under-performed and which go under are those which failed to bring outsiders into top management positions.
Outsiders can be more objective when it comes to decision-making and dealing with non-performing family members in ways relatives cannot. There is, therefore, a need to ensure that succession planning be considered an impersonal business process - to ensure that the most capable be allowed to manage the business with outsiders included as choices.
As Ralph Waldo Emerson wrote, "Every man placed where he belongs, with so much power confided to him as he would carry and use." He was following an earlier tenet from Napoleon, "Whenever I found talent, I rewarded it."
The author is a HR consultant in Singapore.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
